Glossary
What is Sales Tax Nexus?
Definition
Sales tax nexus is the legal connection a business has with a state that requires the business to collect and remit sales tax on sales to that state's residents. Historically, nexus required physical presence (office, employees, inventory). Since the 2018 Wayfair Supreme Court decision, economic nexus (revenue or transaction volume thresholds) also establishes nexus.
Typical economic nexus thresholds: $100,000 in gross sales OR 200 transactions into a state during a 12-month period. Thresholds vary by state.
Why it matters
- A freelancer selling templates, courses, or digital products across state lines can trigger nexus in states they've never visited. Ignoring it means past-due sales tax + penalties if the state audits.
- Service-only freelancers are usually exempt — most states don't tax professional services. But always confirm for your state and service type.
- Ecommerce sellers on Amazon/Etsy often have "marketplace facilitator" protection — the platform collects on the seller's behalf. Direct-to-consumer sellers (Shopify, WooCommerce) are on their own.
Best practices for Sales Tax Nexus
Know your state's threshold
Salestaxhandbook.com or avalara.com/taxrates have current thresholds by state. Track your gross sales + transaction count into each state monthly.
Register, collect, and remit in every state with nexus
Registration is free in most states. Collecting + remitting is where the admin cost lives. Services like TaxJar or Avalara automate this for under $200/mo.
Confirm service taxability
For services, most states don't tax. But some do tax specific services (data processing in Texas, software maintenance in New York). Don't assume — confirm for your specific service.
FAQ
Do I have nexus in my home state?
Yes. Physical presence always creates nexus. If your state has sales tax and taxes your service, you collect in your home state first.
Does a marketplace like Etsy collect sales tax for me?
For the states where Etsy is a marketplace facilitator (most), yes. You still might owe for other states you sell into via non-marketplace channels.
Ready to track nexus thresholds?
Hustlay Business tier tags revenue by customer location, so your approaching-nexus threshold is visible before you cross it unexpectedly.